Stalking the elusive grocery

It's a common refrain heard among neighborhood groups: When will Downtown get a major grocery store?

Landing a full-service grocery store has been a top priority of Downtown leaders for years yet has proven to be an elusive goal. Several chains have taken a close look at the Downtown market, but none has taken the bold step and opened a grocery.

Rumors have long filled the vacuum, and last week, a major one flared up. According to neighborhood and business sources, Lunds could soon announce its purchase of the former Billy Graham/World Wide Pictures site at 1201 Hennepin Ave. S.

Michelle Croteau, a spokeswoman for Lund Food Holding, said Nov. 18 that the company had no news to announce about a Downtown grocery store. She said the company has looked at several Downtown locations since 2000.

A telling -- or coincidental -- development: the CVS pharmacy chain, which had a purchase agreement on the World Wide Pictures property earlier this year, is out of the picture, according to Jim McCaffery, a senior vice president and principal with real estate consultants Colliers Turley Martin Tucker.

McCaffery, whose company is brokering the site's sale, said a new owner would be announced Nov. 29.

Lunds-to-Loring may be another mirage in Downtown's grocery desert. Still, some residents have taken comfort in the plans for the new Eastgate development across the river at Central & University avenues, which tentatively calls for a Lunds. Pending city approvals, the new Eastgate is expected to open sometime in 2006. The proposal is expected to go before the city's Planning Commission on Monday, Nov. 22.

Croteau said negotiations are ongoing with Eastgate's owner, Hillcrest Development. The site currently houses Rick's Market, which Lund bought earlier this year. "We don't have any immediate plans for conversion," Croteau said.

If the Eastgate deal moves forward, the store would be about half the size of suburban Lunds, roughly 17,500 square feet compared to 40,000 square feet, according to a proposal. It would be comparable to the Uptown Lunds. A Loring Lunds could be built on a similar or even smaller model.

With that Lunds still speculative, community leaders continue to press for an urban market in the Downtown core or nearby neighborhoods such as North Loop, Loring Park or Elliot Park.

Efforts are underway to attract a grocer to City Center, 615 Hennepin Ave. S. The mall is undergoing a major remodeling designed to attract new retailers.

Developers and neighborhood groups have also targeted California-based Trader Joe's, a hip grocer rumored to be looking at breaking into the Twin Cities market. Those rumors have placed a Trader Joe's at the current site of Loring Park's City Market, 1240 Hennepin Ave. (across the street from the rumored Lunds site) or at the Towers Lofts, a new North Loop development at 700 Washington Ave. N.

Dianne O'Connor, a Trader Joe's spokeswoman, said the specialty grocer doesn't discuss plans until after a lease has been signed.

However, according to a real estate broker who asked not to be named, Trader Joe's first would open stores in the suburbs, such as Roseville, before moving Downtown.

The broker says grocers have determined the market is ripe near Downtown, particularly in the North Loop, based on a formula analyzing educated households. However, no stores are planned for the indefinite future. There are an estimated 30,000 residents and 165,000 workers Downtown, according to the Downtown Council.

North Loop developer Chuck Leer has worked to land a Trader Joe's for Tower Lofts, and would like to see retailers factor in Downtown's future population growth.

"[Retailers] seem to be fixed on where the proverbial puck is today rather than skating to where the puck will be," Leer said.

Though a brick-and-mortar grocery store may still be a pipe dream in skyway-land, Golden Valley-based SimonDelivers, continues to expand its delivery services Downtown with an aggressive marketing campaign targeting condos, apartments and town homes. The service offers online and phone ordering for a $5 delivery charge.

Katie Hatt, an economic development coordinator for Elliot Park Neighborhood, Inc. (EPNI), has worked for years on the recruiting effort. She said securing a mid-size to large store is crucial for area residents, many of whom do not have cars.

In Elliot Park, for instance, about 50 percent of the residents are car-less.

Currently, EPNI is working behind-the-scenes with Adam Ali, owner of Elliot Park Grocery, on a renovation of Kenny's Market, 737 E. 14th St., next to the Band Box, 729 S. 10th St.

"In my volunteer work with Citizens for a Loring Park Community and in my work at EPNI, [a grocery] is constantly cited as a top priority, but making it happen has proven challenging," Hatt said. "In my discussions with grocery operators, suppliers and real estate brokers, the cost of land, availability of a sufficiently sized building or parcel and access to sufficient parking seem to be the sticking points."

Another potential problem for grocers is that a competitor could quickly open another store nearby. For instance, a grocer who opens in Loring Park could lose customers if a store opened in the North Loop.

Tony Strauss, a senior retail association for the Minneapolis-based commercial real estate firm Welsh Companies, said there are several residential pockets on Downtown's edges, but not one neighborhood large enough to support a store on its own.

"There has been hesitation from grocery stores in the past that they could get cut off easily -- that the market could get split up prematurely," he said. "But there has been such a housing boom in the last year that they might be looking at it differently."

For some grocers, conceiving of a Downtown store requires a paradigm shift, said Betsy Buckley, a consultant to Brookfield Properties, which manages City Center and Gaviidae Common, 651 Nicollet Mall.

Most have formulas that apply to neighborhoods in the suburbs or more heavily residential parts of the city. At those stores, most customers make weekly trips and buy several bags worth of groceries.

A Downtown store is more likely to attract customers who buy fewer groceries per trip but shop more frequently, she said. (Experts say this is exactly the dynamic at Target's Downtown stores, compared to those in the suburbs.) A Downtown grocery would be a destination for the 85,000 people who walk through the skyways on a daily basis and would attract residents who live on the edges of the commercial core.

"When they watch the traffic patterns, they start to see the potential," she said.

Others remain skeptical, pointing out the lack of free parking and doubts that customers would walk from Downtown's outlying neighborhoods, she said.

Victor Grambsch, chair of the Nicollet Island/East Bank Neighborhood Association, also sees the need for a new way of thinking about urban grocery stores. Grambsch has led a joint neighborhood task force on the Eastgate redevelopment.

"The proposed Lunds in the new Eastgate is an example of a new model, smaller-footprint store that Lunds has been thinking about for some time," he said.

The new model draws more customers on foot or public transportation, he noted.

"Grocers like Lunds are used to developing suburban big-box stores hiding behind large parking lots next to freeways. Such a store is obviously neither appropriate nor feasible in Downtown -- or anywhere else in the city in my opinion," he said.

North Loop developer Jim Stanton of Coon Rapids-based Shamrock Development said he's heard the same concerns raised about a grocery store's viability.

"There are two problems with the grocery store: You need a lot of surface parking or you have to build an expensive structure for parking. Either way, parking is a hurdle that's hard to get over."

Stanton, however, is optimistic that more retail will find its way to the North Loop. He's talking with a pharmacy and an upscale deli about possibly opening in commercial space in the 212 Lofts on North 1st Street.

When all the construction is complete in the neighborhood, the North Loop will have more than 2,000 households -- a critical mass that can support more retail, he said.

City Councilmember Lisa Goodman (7th Ward), a Loring Park resident who represents Downtown's business district and Loring Park and Elliot Park neighborhoods, is also optimistic about the possibility for new retail.

Goodman has advocated for a Downtown grocery store for six years. "I think there is going to be a break in this very soon. My prediction is by the end of the year there will be an announcement about a grocery store," she said.

She had no comment on the Loring Park Lunds rumor.

Mayor R.T. Rybak is also confident about the prospects of a new grocery store. Recently, he's said that three chains are seriously looking at the market.

"I was at the Downtown Council when we first began conversations about a Downtown Target. It was always assumed [for] a Target and a grocery store, we [would] need a massive subsidy," Rybak said. "It says a lot about the growth of Downtown that the grocery stores now can work because the market is so strong -- not just one, but possibly two or even three."

Peter Brown, chair of the North Loop Neighborhood Association, urges patience. At a meeting earlier this year he noted that the new Cub Foods on West Broadway in North Minneapolis is a convenient option for many in the North Loop.

"In general, I think we are doing everything we can to talk to potential operators of grocery stores and specialty stores," Brown said. "However, our neighborhood is still growing, and it probably does not yet offer the density a full-scale grocery store would require to be successful economically. On the other hand, this may change rapidly as the many residential housing development projects in the neighborhood are completed and our population keeps booming."